Sunday, 29 April 2018

Ethos Global was forced into liquidation 10 months ago. The founders have since moved into the venue fitted out by Ethos Global in London and started a new business, SOMA.

We have written many times about this outfit. Crowdcube investors put in around £800k in 2016. Then almost immediately the company 'closed' its only studio in Cambridge, moving to the London site and spending most of the cash there. The Cambridge landlords then had Ethos closed. All quite straightforward.

Well it should have been. But the local liquidators couldnt handle the situation and in February of this year they gave up and handed the case to a London firm, Mazars LLP. So essentially since July 2017 nothing has been accomplished.

Meanwhile, the two founders have been very busy. Not only have they used the assets of the old co to set up their expensive new studio in Spitalfields, but they have launched a plethora of newcos. The old Co is not yet buried and serious questions over their conduct have to be answered.

The two founders did make an offer of free shares in Soma but we have it from investors that this hasnt been followed up.

Soma has now grown wings. The two founders have a Soma Holding Ltd which in turn has a share on Soma Retail Ltd and Soma Education Ltd and Soma London England Ltd. The two of them also have Minerva Method and the good Dr has also opened Singularity Healthtech Ltd. All of these newcos were established on the same day in February 2018. Something is brewing and it smells.

Here is the Q. If we are right that these two directors have behaved in such a way over Ethos Global that their ability to be directors in the UK might be called into question, then none of this activity will stand. So why has it taken so long to make any progress on the liquidation. In the last conversation we had with the Cambridge liquidators, we were told they were waiting for the directors to come for another interview to explain things.

You might ask what Crowdcube, who allowed these two to take £800k off their 'members' have done about any of this. The answer is nothing, as it always is with Luke and Darren. Sweet as pie when they are about to get your money and their commission; shadows when the yoga goes pear shaped.

Craved raised 130k on Crowdcube just over a year ago. That was at a value of £900k. Now they are back for more at a valuation of £1.6m. They will now be part of Beauhurst's CAGR success data.

But hold on. Craved predicted revenues in excess of £1m by 2017. They have delivered £147k and this was with growing 100% in each of the last 2 years! This is a core claim in their new CC pitch. And its true. But if you compare it with their previous claim - they have failed miserably. So how can you justify the valuation almost doubling?

You cant. It is pure fantasy for £147k revenue in 12 months, after 3 years 'growth,' to give a company a valuation of anything over £500k and this sector is highly competitive. £1.6m is a travesty. One of the pitch's big claims is that their corporate sales have gone from next to zero to a little more than zero.

2015 - Actual £27k Projected £80k - this was 'projected' well after the year end so how they are so far out is staggering. You do have to ask about CC's DD here!!

2016 - Actual £100k - this is our estimate based on 2015 and 2016. Projected £315k

2017 - Actual £147k Projected £1m.

2018 - ??? but YE March 18 Projceted £2.3m

What you can do is play the Crowdcube game. You dont tell people that you are off projection by over 7 times. Instead you give them the truth about how the revenues have grown 100% each year. If you dont have access to their previous pitch - how would you know? It's the truth no doubt but it hides the real information. Smoke and Mirrors is how Crowdcube run their own business.

Whats more compelling here is that the 2015 'projected' figure of £80k, which turned into £27k for the full 12 months, is essentially proof that either CC dont bother to check these things or that someone lied. The company's YE is March. So when the pitch was live on Crowdcube, Craved would have known that their 2015 figure was out by over 3 times. For whatever reason, no correction was made. Surely if it had been, this company wouldnt be back here again.

CC investors dont see this picture - because it is concealed. They just see 100% annual growth.

Why would anyone believe another figure Craved produce? £140k is around £11,500 per month. It is so small that in two years they have failed to even pressure test their model. Would you buy shares in your local corner store and expect a return? It probably makes a living for the owner, but it's not an investment. He wouldnt ask you for money.

I have no doubt the good folks on CC will back this business and we will see the usual debacle. It's the norm.

This does make a total mockery of Beauhurst's much trumpeted CAGR calculation. Their claim means any company that has returned for a new round at a higher valuation, adds to its investors' portfolio value. Even though this value isnt real and as in this case, isnt based on anything other than the platform's refusal to run a down round.

Of course all of the above is just our opinion. We are generally right and we can be certain that we are more right than Crowdcube when it comes to selecting their lemons.

Friday, 27 April 2018

A direct comparison is possible between the way Crowdcube deal with shareholders in a failed company and with how Seedrs deal with them.

You may remember the debacle that was Ethos Global - they ripped £800k off Crowdcube investors and then allowed the company to be put into liquidation whilst taking that money and spending it on assets for their new venture Soma London England. The Insolvency guys are still trying to find out what happened almost a year later. Help for CC investors from CC; absolutely none. We have copies of CC emails from the CC 'team' telling investors that really they should talk to the founders of Ethos - there is nothing Crowdcube can do. That's it. We emailed them on behalf of some investors who asked for help and got no response at all.

Crowdcube have a reputation for this shabby behaviour - we have highlighted many instances on here.

So compare this to the developments with Nick Hatter's Giftgaming - which funded via Seedrs. Nick has been a bit of a naughty boy - according to Seedrs. Ignoring the ins and outs of what went on with his now defunct company, Seedrs have pressured him to give up his 78% share of the proceeds of the liquidation, in order to give these to the Seedrs investors. They have spent a considerable amount of time and effort to reach this outcome and have sent investors a lengthy email to explain the current situation. It is still a loss for investors, but it shows that at least Seedrs care for their clients - the investors who make Seedrs tick.

Superjam raised £308k in 2015 on Crowdcube. Now accounts for YE January 2018 show profits of £15k against the targeted £1.3m EBITDA they published in their pitch. What the accounts really show is little activity for a company on its way to this impressive number.

Superjam was set up by budding entrepreneur and philanthropist Fraser Doherty when he as 16. We have struggled to find any real indication that this business has ever made large sums. It says in their PR they do and that is what Crowdcube bought into. But a profit £15k isn't a profit of £1.3m or really even on the same planet.

Fraser has other businesses, one of which, Beer52, has also used Crowdcube. He is an MBE for his charity work. Well it couldnt have been his business.

They made a big thing of their charity work in the Crowdcube pitch -

SuperJam is also giving back to the community via our registered charity The SuperJam Tea Parties, which runs hundred of free tea parties for the elderly. The company plans to use your investment to develop and launch additional brands within the same market, such as jams for children, peanut butters, honeys and maple syrup.

According to figures at OSCR 2017 activity was £1,200 spent £1,200 received. We havent found any new brands, in any market. Although there are mentions of honey and peanut butter on the Korean site but they dont appear to be for sale.

The last tweet on their page is promoting the 2015 Crowdcube raise. They have 700 followers. The last post on FB was July 2016.

This is what they said on the CC pitch -

Sales growth will primarily come from increased distribution in UK supermarkets - such as Sainsbury’s, Tesco and The Co-operative.

Waitrose are only stocking the Blueberry and Balckcurrent jam and that is only on line. Its on special offer. We couldn't find it for sale anywhere else in the UK and no other stockist is listed on the Superjam website.

We have written about Jam Boy several times. But obviously not as many times as he has written about himself. News about the progress of Superjam being exported to all four corners of the globe seems to have been exaggerated.

Just when we thought that the news of Revolut's paper gain might make some sense for Crowdcube investors, here we are again with normal service resumed. Equity being sold on false information and fantasy projections.

Thursday, 26 April 2018

In some much needed good news for Equity Crowdfunding, the latest valuation of Revolut at £1.2bn means that Crowcube investors who bought in at a value of around £44m when they raised £1m, are now sitting on a paper gain of 20X.

These figures are somewhat simplified but they are in the right ballpark. CC claim that its a 25X gain. Dilution has been approx at 137X for CC SHs and will clearly increase more if they need to raise more equity capital. The company removed all preemption rights from SHs last August.

What you do have to remember, as you crack open your Miller Lite tonight, is that this is not yet a real gain. Their shares are illiquid - at that value anyway and the company is only valued at £1.2bn because some very rich Russians want a piece of it.

But it is great news for Crowdcube as they can now show that it is possible to get a 20X plus result - on paper. What they now need asap is for Revolut to surge forward in real value with an IPO or similar to realise that ROI and convert Crowdcube's claims into reality.

Sunday, 22 April 2018

I suppose you could call this a pivot. River Cottage are no longer opening their own restaurants - now they cuckooing in our nation's best loved tourist spots.

When you have spent all your money and the results are poor, then this is not a bad option. River Cottage raised £1m in a bond on Crowdcube for the express purpose of increasing its restaurants. This was 3 years ago. Since then the number 4 has been reduced to the number 3 - Plymouth, a flagship venue, crashed.

Now RC have 3 more 'venues' on their website. However these are not restaurants or even theirs. They are JVs with various high footfall tourist centres - cafes really. Not quite what they told investors would be happening.

Glyndebourne, Hatfield House and Whipsnade Zoo all have RC eateries - all converted from existing set ups. So low capex. But then again low margins and we have no idea currently what sort of deal they struck. The brand is ideally suited to these places so it may just be a stroke of genius. In any case its has to better than nothing.

We wrote a few pieces about this when their Plymouth unit closed down and they filed a £1m loss - here.

Wednesday, 18 April 2018

A recent example on Seedrs comes to mind. Society pitched and successfully raised a heap of cash on the Seedrs platform in January 2018. Now investors have been told they dont want the cash - they have sourced it from somewhere better.

How do you investors feel about this - really?

On checking out Society we came across a far more serious example of potential abuse. The company recently suspended its M&A clause on pre emption rights by voting on a special resolution. That's fine as it was only going to affect the founders. But what if this happens when they have a Seedrs nominee account holding hundreds of Seedrs investors. These investors form only a small part of the overall share capital in the company. So the majority ownership by the directors could do the same thing whenever it chose.

Roll that fact out across all of the Seedrs and Crowdcube investments and you wonder why people bother with legal agreements. We have already seen a few cases where investors have had their pre emption rights removed.

In 2013 Flossonic won Crowdcube's Product of the Year. Along with a whole host of other winners who have departed this world. It also took £126k off Crowdcube punters, claiming SEIS and EIS.

Since then it has done nothing. Flossonic was supposed to be a special electric toothbrush. Well it either never existed or it couldnt be sold as revenues were next to zero for all years since 2013 and now the company has been struck off by CH.

In summary, the 100 plus investors would have been better investing in a new wooden spoon manufacturer.

In 2013, Crowdcube struck a very rich vein with the award winners they selected and PRinged everywhere -

UPDATE - since writing this a day ago , Affresol has fallen off and is now in liquidation.

Tuesday, 17 April 2018

Jewelstreet is back on Crowdcube. It last funded here in 2014 and promised sales of over £30m in 2016. Sadly it has only just managed around a hundredth of this. Maybe this time round they will get to have a better go.

There has been a complete refurbishment of the management suite, led by the main shareholder, Guernsey based businessman Paul Fraser. Mr Fraser is a very busy man so how much time he will spend on this company is questionable. In fact Jewelstreet doesnt even get a mention on his Linkedin page. (Well it may now).

I suppose this all depends if you believe what they say in the pitch. The hard evidence we have is that for 3 years it has been a complete flop. But that is the same with pretty well all of the Crowdcube businesses. Yet you still fund them.

In the first pitch, which smashed its £100k total and finished on £180k, the company told investors via an article in Insider Media, here, that a likely exit date was 2016.

Monday, 16 April 2018

Vita Mojo raised £3.2m on Crowdcube. Now it has offered those shareholders a time sensitive share offer at the same price for £300k worth of their shares.

Vita Mojo puts a whole new meaning into laptop food. Their software allows them and you to create your own food.

The idea is new and it will be a while before we know if it works. But having raised over £3m via Crowdcube, shareholders were surprised to find an email asking them to buy more shares - an allotment that the company says was time limited and in total came to an investment of £300k. The minimum investment was set at £7,500. That time has now passed.

Quite why they would be time sensitive was not explained. One idea we had was that this could be a case of an investor/s pulling out after the campaign closed?

Friday, 13 April 2018

Bactest funded twice through the Syndicate Room platform; around £1m in total. Now with the cash gone and sales unable to meet costs, the company has put itself into liquidation.

There are two kinds of failures with start ups. Genuine companies that do everything in their power to trade and make money and companies that take the money and never had a chance. Bactest is firmly in the former camp.

As the name suggests, the company developed and sold equipment for testing bacteria levels in water.

Its products did sell and the company won several industry awards. Since funding, it had added to its portfolio. But therein lies the problem. Maybe more concentration and spending on driving sales of their original products and less on R&D and this story could have turned out differently. Either that or deeper pockets. But the investment line ran dry and that gave the company little choice.

It is too early to know the state of their accounts but there is sure to be value in their IP.

This is one failure that it seems fair to put down to death by natural causes. Both the company and Syndicate Room are helping with investor enquiries.

We were asked to provide some good news by a reader. That's quite difficult if we want to give you the facts. However this is an interesting illustration of the problems all things Russian have today.

As Im sure you all know, Revolut is the baby of a Russian parent. Recent news, which we were told was good news, reveals that there is a possible funding round for Revolut being led by DST, founded by the Russian venture capitalist Yuri Milner . This, if it happens, would push Revolut almost overnight into the Unicorn Club. It would also give Crowdcube investors a theoretical return of 30X. You see we can do good 'news'.

But 'stoy' we cry. A recent development with the Telegram Chat App has led to the Russian Government blocking access. Telegram claims 9m Russian users. Telegram is owned by a Russian, Paul Durov. It recently completed a £1.2bn ICO. The reasons given for this block is that the company failed to give the Russian authorities access to the data of its subscribers. This is a so called security measure. The company originated in St Petersburg but left and is now in Dubai.

So when you hear that the company you invested in, Revolut for example, has Russian connections, you should maybe factor this into your investment decision. Crowdfunding investors in Revolut came from Crowdcube and then Seedrs.

Thursday, 12 April 2018

We agreed not to disclose the name of this company, as they are trying to complete a deal that will mean they dont have to liquidate. But it is a busted flush in terms of the business and its 200 plus Crowdcube shareholders.

The CEO of XX has promised to give us the details of how the company came to this situation, in a month or so. He said he would also reveal his feelings about Crowdcube. That should all make for interesting reading. It is at least some progress to see a CEO who has used Crowdcube, try to clear up the mess rather than phoenixing or just disappearing as most of them do.

This company had some substantial Government backing, something that may well have swayed Crowdcube investors. You know how it works - oh look such and such which has a board crammed full of experienced business leaders has backed this venture, so better come on board. Only 2 years later and bang - its all gone tits up. All the investment burnt.

Just in case you are wondering, the 'sale' in progress is more of a handover with next to zero return for anyone.

Wednesday, 11 April 2018

UPDATE - We were contacted by Dorian Spackman. He claims that he was never part of Socapps but that his company CMI, was contracted by Socapps to develop the Browsa App. We dont know if this is correct but in the Crowdcube Pitch it states that Dorian Spackmann is The Technical Director of Socapps - this information would have been verified by the FCA regulated Crowdcube platform, under their FCA licence before being used to sell this company's equity to the public. So someone is misleading someone else.

Socapps Ltd, with its app Browsa, has been in CH limbo for two years, having failed to file accounts since 2015. The company's SM has had no activity on it for 3 years. It looks like a busted flush.

Or as we call them, a zombie - a business that someone keeps on preventing the system from closing down. Crowdcube have plenty of them currently on their books. Companies that raised funding, and then just evapourated into the ether. Zombies are right up there with failures in terms of numbers of successes Crowdcube had funded.

The Browsa App now appears to be sold by Cornish Media Industries, a company with a large deficit on its most recent balance sheet. The main director of CMI, a Dorian Spackman, was also a main feature in Socapps' Crowdcube pitch and was a director of a now closed company called Browsa App Ltd. He isnt connected legally to Socapps.

Now it turns out that the Stephen Rushworth, the man behind the Crowdcube Socapps campaign , is now the Conservative CC for St Issey and St Trudy - a post he won in the local elections by a small margin from the LibDems last year. In his register of interests, he mentions Socapps, but it's misspelt; twice. A search under Socapes Ltd comes up blank at CH, which might be useful if you didnt wish people to see its filing history.

We tried to contact all the players in this but as usual we didnt get a response. Honest men dont hide.

All a little odd but that will not come as any help to Crowdcube investors who have yet again been sold a pup by the platform.

Monday, 9 April 2018

Sustainable Power raised £1.8m on Crowdcube back in 2014. Promises of money saving gas boilers seem to have evapourated - we cant find sales or the product anywhere. Losses have been impressive and the team of specialist engineers on the board have all gone. What seems to be left is a guy whose speciality is Isle of Man Companies and liquidations.

UPDATE -

Following The Times article, we can now confirm all of our articulated suspicions about the is company are true. They lied about most of the claims they made on Crowdcube. Crowdcube did not bother to check these claims and indeed instead promoted them as verified by the platform. In what looks as close to scam as a scam can get, the author of this mess has disappeared - presumably off shore. LESSONs - Crowdcube sucks. The FCA is pointless.

For all those thinking of Crowdfunding, the SP Crowdcube video is worth watching. It very cleverly engages its audience in the story of SP and how it will take over the world. Not much in the video has come to pass yet and we have some doubts that some of its content is genuine. However in the hands of a real company, this technique would work well.

Lets take a look at the man behind this enterprise first. Ashley Moore appears on his LI page dressed in white tie; his main job has been as a LIFFE trader. His page has little more information - just two companies listed. SP and City Golf Clubs Ltd.

City Golf Clubs was put into liquidation last year. Its parent company is named as Seattle Investments LLC. CGG accounts show that Seattle Investments is registered in the Isle of Man. The Liquidator's report gives them a Geneva address. CGG went down owing considerable sums - totalling almost £1m. Most of this was owed to Seattle Investments.

That is a coincidence, because one of the main SHs in Sustainable Power, is an Isle of Man registered company called Tacoma Properties LLC, registered at 8 St Georges Street, Douglas IoM. This is the same address given for Seattle Investments. This address appears in the Panama Papers. Just saying.

One report we have from the IoM Government website states that both Tacoma and Seattle ceased to exist on the same date - 21 July 2017. We dont know for sure that Ashley Moore is the founder/director of either of these IoM companies - you have to pay for that information. But its an interesting coincidence.

As if things were not odd enough, a previous version of SP, Sustainable Power Solutions Ltd was finally liquidated in February 2015, having started the process well before the newco appeared on Crowdcube. Ashley Moore was the main man here too and almost all the money owed, was owed to that Tacoma outfit in the IoM.

In the video we mentioned at the start, there are claims made. These are claims that Crowdcube would have been duty bound to check under the terms of their FCA licence. One is that SP already had a 2e boiler delivered and saving money for a Sunderland care home run by the Gentoo Group. We have not been able to verify this. SP claim to have BSI certification. We checked this with the BSI register but could not find any Sustainable Power Ltd. That claim was made as part of the Crowdcube campaign for £1.8m. That does not mean it doesnt have one, just that we couldnt find it. It seems unlikely that a care home would take on an experimental boiler that was not BSI certified as safe. SP's website has the BSI logo but this is easily downloaded for free.

In the Crowdcube verified pitch, SP stated the following -

B.
ACHIEVEMENTS TO DATE

The Spice 2e unit has passed its
British Standard Institution (BSI) Certification for the installation of
demonstration units into its customer base and a live trial has been installed
into a care home in Sunderland.

The unit was installed 3 months
ago and we estimate that it is currently running over 23 hours a day and
delivering over 4,000 litres of hot water on a daily basis to 35 rooms and 11
bungalows.

The Spice 2e can be
installed quickly in under 2 hours by one of our service engineers and is
delivered to site once the services (water gas, flue and hot water tank) have
been fitted. As we are predominately installing in plant rooms all these
services are already close to hand.

Sustainable
Power has signed an MOU with ESP www.espprojects.com for 2,000 units as soon as
they become available and indicated to a further 90,000 suitable sites in the
North East alone. Three demonstration units are currently being installed in their
client base one of which has already been running for several months.

"We
have found that the unit has been capable of seamless integration into the
existing building services... We are confident that this unit has significant
potential in a wide range of applications and the inherent robustness of the
design is a significant improvement on comparable units on the market."Don Lord, ESP Director

Separately,
Sustainable Power have signed a further MOU for 1,500 units on the same terms
for several sites under the stewardship of Nick Tubbs’ Redtree Housing (a
sustainable housing developer) for the Sherwood Housing project (http://www.redtreellp.com/background.asp)

We are currently in discussions with
various main stream M & E contractors and housing associations in order to
replicate this agreement throughout the UK.

We wonder if Crowdcube ever saw any of these documents?

Ashley names Colin Howel as the new company chairman in the pitch - and messages everyone during the pitch -

Dear Investors,

We have recently taken on a new chairman who has over 35 years’ experience in large scale production and asset management. Colin has come on board as an active Chairman and will be bringing not only his manufacturing knowledge to the fore but will also be allowing Sustainable Power utilise the key personnel from the companies he currently owns to add /there experience to the commercialisation process.

The telephone number on the SP website 01869 327133 is disconnected. It is also the telephone number for a local, now defunct, eatery. The website new's page hasnt been updated in several years. There is no where on the website to purchase their product or even ascertain a price for it. Delivery and installation details are 'on hold'. Emails to the company have not been answered.

When it quacks like a duck and swims like a duck, then it is probably a duck. Of course the beauty of the IoM emblem is that no matter how you throw it, it always lands on its feet. Time will tell but the signs for Sustainable Power and £1.8m of Crowdcube investors' cash are not good.

Supposed to deliver huge savings, we just wonder if this 'business' was ever likely to deliver anything?

This is bad. Crowdcube has an FCA licence based on its ability to present investors with a fair level of information. Quite simply we now know for sure that they dont.

Just a few days ago a new pitch appeared on Crowdcube. The company is called Smart Grid Ltd. Ignoring the fact that this business has its own fundamental problems and is laughingly valued at £25m, one of its team of directors was cleared in 2010 in two court cases costing an estimated £20m, of being involved in a massive Ponzi scheme. The main man behind the scheme pleaded guilty. There is an article here in the Telegraph.

The companies involved in this scheme have a complex web of connecting lines but for our purposes it is sufficient to say that our director, Lincoln Fraser, was a director for the year before the companies went into administration owing many tens of millions.

This information is clearly material to any investors' decision on this opportunity. However Crowdcude fail to mention it.

So if they do do checks on Directors, why didnt they find this? Or if they dont do checks, why lie? Or if they did checks and decided to bury this information, why have they got a FCA licence?

It is not a crime for Lincoln Fraser to try to forget what happened in 2010. But it should be one for Crowdcube not to have the very basic ability to pick this information up. As you will all know, we have been saying this since day one. Luke Lang sat in the HoC Treasury Committee meeting and stated that CC do thorough checks. Well now we know that is a lie.

This campaign is now suspended although you can still view it by doing a simple google search. The morons!

Smart Grid isnt. The company hasnt traded as of May 2017, since it was set up in 2014 according to CH. Now it makes claims in the Crowdcube campaign that -We generate 1.65MW of green energy (CHP & OFGEM approved) from our own power station facilities which is sold to the power station building owner, G4 Group, and also (indirectly) to the National Grid, who pay for every kilowatt saved.

Some of the comments on the forum suggest Crowdcube really have been caught with their trousers round their ankles this time -

INSANE Valuation and Directors involved in Fraud

TAllen18 hours ago

4 Replies

GBP25m pre-money valuation for a
Company with £100 in the bank as of Mar (dormant according to filings), no
clear operations as we stand today and no patents.

Friday, 6 April 2018

Rib Club Global is yet another Crowdcube funded company who have created a large gap between what they promise and what they deliver.

Crowdcube pitch projections in 2014 showed profits of over £200k, when they took £147k off investors. These have vanished into losses for the recent very late filed accounts. They have filed losses of £2k.

Activity looks very weak - trade creditors zero and trade debtors £1k. You might hope that decreasing losses were a sign of increased business and chances of some good growth in 18 and 19. Well the accounts dont generally lie and to have no trade creditors is either fantastic management or a sign of little activity. The main activity for the year seems to have been work done for and invoiced to a 100% owned loss making subsiduary, registered in Spain. Hmmm.

Who knows. Until we start to demand more information from Limited Liability Co's, its just a guessing game. Its like the guys in the picture, are they building or removing the bridge? Only Frits knows.

Thursday, 5 April 2018

This is the shocking state of our entrepreneurial base in this country. A serial failure in the world of start ups is now charging people to advise them on start ups. All using the fact that he was Crowdcube Entrepreneur of the Year 2012.

This sort of thing does my head in. It certainly does not help UK plc.

Jon Paul started a business in 2005 called Front Up Ltd. He traded rugby shirts. That was all fine. In 2012 the business got into a spot of bother and he put it into administration. Well that is fine too, anyone who has run businesses will have had a failure.

In 2012 as Front Up was telling creditors that they had lost their money, Jon Allen was setting up Front Up Retail with Keith Watson - who has featured recently in the Suit that Fits saga. Together they formed Front Up Retail Ltd - using the heavily discounted assets that JP had bought from his administration.

That's not quite so good.

This Front Up Retail has featured here many times - it raised money on Crowdcube twice in 2012 and then again in 2013 before collapsing in a total mess and being sold on in another pre pack to Lyle and Scott. Investors and creditors lost it all.

That's getting worse.

Now in 2016, JP set up another company - Enploy Ltd. This company uses the expertise of JP to advise start ups - for which it charges - who are these idiots? JP's bio on the company website tells interested parties that he has -

over 15yrs experience creating, growing and selling disruptive concepts into new markets. Crowdcube Entrepreneur of the Year 2012.

I think you can guess what we think about that. JP hasnt a clue what he is talking about when it comes to running a company. Just look at the evidence.

In much the same way of as Julia Elliot Brown has created a myth for herself after her business, Upper St, lost Seedrs investors all their money and left her creditors (£400k plus) to die, so JP is trying to create a myth around his failed entrepreneurial history. It simply is not honest and it really shouldnt be allowed. Failure is fine but you have to own it. This country needs better learning about business and how to make it work; not how to avoid the consequences of failure.

You remember we keep going on about Zombie companies that Crowdcube has helped fund. Well this one Ecco Recordings, backed by Pels Asset Management, is about to close - at last.

It wasnt a big one for Crowdcube, £140k invested in 2013/4. Still it follows a very similar pattern to most of Crowdcube's successes. Massive promises followed by no delivery followed by a few years in the wilderness followed by collapse.

We wrote about them in March 2017 here and despite an anon posting a lengthy comment about how wrong we were, everything we said has turned out to be true. Crowdcube investors shafted and lied to. Company run so poorly it has collapsed even with the money that the Pels family office have. One assumes, as Philip Pels has signed off on the application to close the venture, that at least no creditors will be hung out to dry.

Wednesday, 4 April 2018

Crowdcube were the first but they have failed to capitalise on their first mover advantage. As yet another Crowdcube success fails, what is their next roll of the dice?

You have to give Darren and Luke, the founders of Crowdcube, a certain amount of credit for having the idea and getting it going. But that's where the credit must end.

PR can only paper over so many cracks before the walls cave in. Crowdcube is mainly PR - lift the hood and you find a cheap two stroke engine where the PR says its a gleaming V8. Proving the model worked was always going to be difficult. To work, we had to see exits and these take time - much longer than the fantasy figures provided in Crowdcube pitches. You dont expand your cost base unless you have evidence the model works - not if you want to succeed. They either couldn't wait or more likely didnt know this. So they led with PR and fell back on PR - it's all been a myth building exercise.

To illustrate, here is an article from 2017 in The Telegraph by James Titcomb - it opens....

Members of the public have invested more than £250m via Crowdcube, the crowdfunding website has announced.

The milestone comes after a number of businesses funded through the site have been sold, leading early investors to pocket huge gains.

Firstly the public have not invested more than £250m and they know it. Secondly you would have to look very hard for one of these lucky recipients of huge gains and even then, you would fail. It's simply PR put out by the boys and naively reprinted by a lazy journalist. Of course it does depend on your definition of 'huge'; a ploy CC use a lot. Ask CC's loyal investors and they would just cringe.

The main problem is that neither Darren or Luke have run anything successful - ever. They do not have that knowledge, despite what Darren claims in his CV. They have made mistake after mistake with Crowdcube, to the point where now, 7 years after they started, real progress has hit the buffers.

You cant blame them for trying but the really stupid part is repeating the same thing over and over again and hoping it will bring you different results.

The initial reaction to their launch and the first businesses was WOW - first adopters were enthusiastic. The business was small but grew rapidly - failures were slow to come through and they managed a couple of decent (not WOW) exits with Camden and ECar Club. They managed the situation very well - big news about the exits and very little information about the failures.

By 2015/16 however, there were no more exits and the failures began to mount up. People started asking if the hype around the pitches was just that. Darren and Luke introduced some new toys - mini bonds for example. This allowed them in future years to promote a return on investment figure - even though these were loans not investments in the equity sense - ie 'returns' were just the interest paid out on the bond. They didnt bother to distinguish as this would rather spoil the story.

These bonds came and went and we are now left with one company failure - Square Pie - where all bond holders lost their cash. Plenty of other companies that have used the Crowdcube bond have been struggling - The Eden Project, River Cottage, Chilango and Taylor St Baristas to name 4.

By 2016 Crowdcube as a company was accumulating very large losses, running at between £4m and £5m pa. It had in its own CC raises, created some ludicrous projections. In fact our records show that the Crowdcube projection to reality ratio or the PR ratio (!), is one of the worst for 500 companies we have records for. That says a lot.

Investors at this stage were still buoyant - still believing the PR issued that 'next year will be a very exciting one for Crowdcube'. You can take any year, the PR message is the same. Jam tomorrow.

By 2016/17 Crowdcube was burning through over £8m a year. They put their commission rate up from 4% to 7.5% but they were no way near to raising the required £100m plus per annum to get to break even. Despite the PR, their accounts will show more massive losses for 2017. Their backers are deep pocketed but there will come a time when they stop filling in ever larger holes.

And here's the rub. They are now running out of time. With no exits to talk about and investors becoming far more vary of the sorts of manipulation they have been guilty off, the funding for businesses is not growing at the required rate. We dont think they will ever get to BE. How many times can Luke say that next year is the one? We have a queue of failing companies on our radar - all funded via Crowdcube. Yes there are some we would expect to make a good exit but by the time investors have been diluted 6 times and had their 'rights' rewritten, what return they will is questionable

Their latest ploy is a good one - partnerships with various related companies outside of London. So for example a partnership with Scottish solicitors Harper Macleod is expected to pick up Scottish business. According to their own PR, this will double their deal flow. Well it may increase the number of attempted pitches, but will it really increase the investment stream - they only make money on completed deals? We doubt it - it has come too late. Harper Macleod may not have done much research into Crowdcube. They fell for the PR. Their clients wont be pleased. Investors we speak to have moved on to other platforms, ones that take a much more professional and holistic approach. This is the way forward. Crowdcube fund you and ditch you - investors have to look after themselves; the platform takes zero responsibility for the information it publishes. Which is fortunate, as they might have been sued otherwise. But that model simply doesnt work. Investors tell us this and the number of failures and zombies funded via Crowdcube endorses it.

The only answer for Crowdcube is to get at least one large exit - a X10 job. And it has to be in 2018. They have lost their first mover advantage and in the hands of Darren and Luke it turned out to be a disadvantage. Funding hopeless companies using fantasy projections is never going to create a sustainable business - for anyone. Even with S/EIS.

There are one or two possible exits. One has a targeted IPO for this year but Crowdcube were only involved in a very small way - Seedsr will get this credit. Others have 'exited' early, much the same as Camden, forcing CC SHs to sell up and greatly reducing their returns. Many have gone bust or are doing nothing. The return is very poor. You cant hide that forever, even by mixing in bondholders percentages.

Having bigged themselves up so much for 7 years, it looks likely that Darren and Luke will be hoist on their own petards. When people told them that their model wouldnt work, they would have done well to listen.